Drew Receives an Inheritance That Pays Him $50,000 Every Three

question 14

Multiple Choice

Drew receives an inheritance that pays him $50,000 every three months for the next two years.Which of the following is closest to the present value (PV) of this inheritance if the interest rate is 8.5% (EAR) ?

• A)$354,223
• B)$364,309
• C)$365,322
• D)$400,000

---

Definitions:

Variable Component

Variable Component refers to the part of total costs or expenses that changes in proportion to changes in the volume of activity or production levels.

Fixed Component

In cost accounting, this refers to costs that do not change with the level of production or sales, such as rent and salaries.

Variable Overhead Efficiency

Variable overhead efficiency refers to the effectiveness with which a company manages its variable manufacturing overhead costs in relation to its production activities.

Rate Variance

The difference between the expected or standard cost and the actual cost incurred for a particular expense, often analyzed in budgeting and cost management.